Global SAF production set to double in 2024, with future growth policy-dependent

Global production of sustainable aviation fuel is set to surge 98% to 1.95 million mt in 2024, according to forecasts by S&P Global Commodity Insights, with the growth rate slowing from 174% year on year in 2023.

Looking ahead, the increase from 2024 to 2025 is expected to be 81%.

Europe will account for over half of sustainable aviation fuel production in 2024, but sustained growth will depend on how policies are designed.

Europe currently accounts for the largest share of global SAF production, and is expected to produce 53% of global output in 2024, against 23% from the Americas and 24% from Asia and the rest of the world.

In Europe, the increases will lag behind the global growth figure, however. Production of SAF in 2024 will be 29% higher on the year at 1.04 million mt, rising to 1.6 million mt in 2025.

Europe is facing some significant aviation regulatory targets, mandating increased uptake of SAF. Under the European Union's Fit for 55 program to cut carbon emissions, starting from 2025, aviation fuel suppliers must ensure that all fuel made available to aircraft operators at EU airports contains a progressively increasing minimum share of SAF.

Under the EU regulation, SAF must make up at least 2% of aviation fuel by 2025, 6% by 2030, 20% by 2035, 34% by 2040, 42% by 2045 and 70% by 2050. Synthetic fuels should constitute a progressively increasing proportion of the fuel mix, which is to reach 35% by 2050.

"The 2% target is modest and it should be possible to meet that with mature HEFA SAF made from waste oils and fats feedstocks," said Seb Lewis, associate director of Agribusiness consulting at S&P Global Commodity Insights. "As the mandates get more demanding the design of policy will become more important," he added.

"Any policy support will need to be high enough to incentive the production of SAF over renewable diesel, which currently receives double credits in some European countries," Lewis said.

New planned SAF production pathways lie ahead

The majority of SAF currently in use is produced by the Hydrotreated Esters and Fatty Acids (HEFA) process, which uses oils and fats as feedstock. However, market sources are concerned about the sustainability credentials and future availability of these feedstocks, particularly given competing demand from other sectors and regions.

In the UK, a nearby and adjacent market, the government has said it will introduce a SAF mandate in 2025 requiring at least 10% of jet fuel to be made from sustainable feedstocks by 2030. However, the UK government has also announced plans to introduce a cap on HEFA-based SAF, pointing to the need for expansion of other production pathways in the near future.

"We don't know how much [HEFA] feedstock is available today because we don't know how much of it is legitimate," said one biofuels market participant. "The US and Canada is taking more feedstock, including Asian used cooking oil. The SAF ReFuel EU aviation mandate in 2025 and the maritime mandate in 2025 all increase the pressure on feedstocks."

"Further out the real question is whether Power-to-liquid technologies will be technically and commercially mature enough by 2030 to start delivering the volumes demanded by the mandate in the 2030s," Lewis said.

In North America, SAF production will have to wait until after 2024 to see the most significant increases, with much SAF capacity expected to come online in North America from 2025 onwards, Jamie Dorner, biofuels analyst at S&P Global said.

"Currently, the US has very few plants operating and producing SAF, so the ramp up time for additional plants comes of great importance, especially as the US seeks to meet its production targets of 3 billion gallons by 2030 and 35 billion gallons by 2050," she said.

SAF to remain a small share of aviation fuel

The International Air Transport Association said Dec. 6 that SAF output will only account for a tiny share of aviation's total needs, and governments have more work to do on guaranteeing supply.

Production of SAF in 2024 will triple from 2023 levels 1.5 million mt, IATA said. This will equal a mere 0.53% of aviation's fuel requirements, and 6% of renewable fuel capacity, as large shares of renewable fuel capacity coming online are earmarked for other renewable fuels, IATA said in a statement.

SAF as a portion of all renewable fuel production will only grow to 6% in 2024 from 3% in 2023 -- an allocation which keeps prices high -- whereas aviation needs between 25% and 30% of renewable fuel production capacity to go to SAF, IATA Director General Willie Walsh said, adding it is up to governments to form policies to make that possible.

Platts assessed SAF CIF ARA at an average of $2,952/mt since the assessment's start in September 2023. SAF has maintained an average premium to NWE CIF Jet cargoes over that time of $1,996/mt, S&P Global Commodity Insights data showed.

The Third Conference on Aviation Alternative Fuels (CAAF/3) hosted by the International Civil Aviation Organization agreed a global framework to promote SAF production in all geographies for fuels used in international aviation to be 5% less carbon intensive by 2030. To reach this level, about 14 million mt of SAF needs to be produced, IATA said.